The smallest high-yield funds in the US and Europe were hit hardest during January's outflows from the asset class, according to Fitch Ratings.

European high-yield funds suffered their largest outflow since August 2011; withdrawals from US funds, while significant, were dwarfed by those in December 2015.

Investors have started to shun high-yield, or junk bonds, due to the ongoing commodities sell-off which has left energy and mining companies struggling to repay debts.

“Flows so far this year indicate that high-yield fund managers need to brace for more volatile conditions ahead," said Fitch.

The ratings agency says higher outflows from smaller funds are due to several interrelated factors.

"Smaller funds are more likely to have a niche investment strategy or to focus on lower-quality securities than larger funds," said Alastair Sewell, senior director of funds and asset managers at Fitch.

"Investors may therefore want to be the first out of these funds if they think outflows will force the sale of safer assets, further increasing the risk profile and weakening liquidity."

Fitch says some rated high-yield funds are taking steps to address liquidity risk, including increasing cash balances to meet outflows and reducing position sizes to improve their ability to liquidate positions if they face a combination of redemptions and market stress.

January's outflows coincided with a slump in high-yield issuance due to fears about global growth and the effectiveness of QE for boosting inflation.

European issuance to end-February fell 90% year-on-year, but Fitch expects primary supply to pick up later in the year.